Why Location based services like FourSquare are already finished.

IN case you didn’t know, the hot spot in startups right now is location-based-services like FourSquare and Gowalla. The idea is that you “check in” to locations and activities using a smartphone app and in doing so you receive badges, coupons, titles, etc. Its a social network built around locations. Neat.

VC’s and Big Companies have been tripping over themselves trying to get on board with these companies. The FourSquare team closed a big round a month ago and are now spending lots of money on things like downtown NYC offices, harkening back to the early 2000 internet boom.

The general idea is that by knowing where people are, advertisements and service offerings can be more targeted. This is an awesome idea, actually, and one that should take flight eventually. Offering me a dollar off at the Starbucks I’m standing next to or 20% off lunch at the Bistro next door in real time is an exciting and smart development in advertising and marketing.

The problem is that like the majority of other web services, people lose their interest in “checking in” to places pretty quickly. To combat this apathy, FourSquare has been fiddling around with auto-check ins in their application. Essentially, your phone would ping your location at regular intervals and check you in to certain places. Of course this won’t work. Outside of the fact that most smart phone GPS’s are only accurate within 300 yards (or 4 city blocks), and outside of the fact that a single ping in a dense location could check you in to half a dozen locations at once, and outside the fact that GPS is near-worthless indoors so checking in at shopping malls and skyscrapers is out the window, the following problem exists: if the service has to work automatically since people aren’t using it on their own, isn’t it just a location based advertising network at that point? And even though the ads might be more alluring, if its just a location based advertising network then it should be expected that people will block out the advertising over time just as they do with billboards and radio ads.

The “exciting” part of location based services is that people interact with the service and thus are willingly consuming its content. Badges, advertising, awards, advertising, “Mayor of this location”, advertising, friends nearby, upcoming events at this location, advertising. If that willing interaction ceases to exist – which it sounds like is already happening – then the compelling part of the platform is done.

Advertising works great if I’m fiddling around on my iPhone and seeking out content and consumables in my physical space. It doesn’t work at all if my iPhone is in my pocket.